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OIG audit of DMWR questions some spending and timeliness of reports

DOI Office of Inspector General logo
But found DWMR generally complied with applicable laws and regs
fili@samoanews.com

Pago Pago, AMERICAN SAMOA — The US Interior Department’s Office of Inspector General (DOI-OIG) is questioning spending totaling $23,080 designating it as ineligible and an additional $3,167 as unsupported following an audit of expenses claimed by the ASG Department of Marine and Wildlife Resources (DMWR) under grants awarded by the US Fish and Wildlife Service (FWS) through the Wildlife and Sport Fish Restoration Program.

So says the DOI-OIG report dated Monday and publicly released Tuesday, which also identified improper drawdowns and late filing of required federal reports. The audit did find that DWMR generally complied with applicable laws and regulations, FWS guidelines, and grant agreements.

OIG says it conducted the audit to determine whether the DMWR used grant funds for allowable fish and wildlife activities and complied with applicable laws and regulations, FWS guidelines, and grant agreements.

The audit period included claims totaling $3.5 million on 45 grants that were open during the fiscal years that ended Sept. 30, 2017, and Sept. 30, 2018.

The audit report questioned costs totaling $26,347 — with  $23,080 designated as ineligible and $3,167 as unsupported — saying that these questioned costs arose due to ineligible costs related to pre-award sub-award costs, ineligible other direct costs, and unsupported costs related to leave payouts.

PRE-AWARD SUB-AWARD COSTS

DOI-OIG said it reviewed sub-awards that DMWR issued to a sub-recipient and identified $14,577 in costs charged to one sub-award prior to the effective date of the sub-award agreement.

The auditors cited federal regulations, including one which states that pre-award costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with written approval from the Federal awarding agency.

However, neither DMWR nor the sub-recipient could provide written approval from the FWS for pre-award costs.

The report said the sub-recipient began work on the sub-award during October 2016. The sub-recipient told auditors that, due to time constraints, it began work in anticipation of the sub-award agreement and assumed it would be reimbursed for the costs that it incurred prior to the sub-award agreement being finalized.

When DWMR issued the signed sub-award agreement on Jan. 19, 2017, the agreement listed the effective date as Nov. 15, 2016, according to the report, which also says that the costs are ineligible for reimbursement because the costs charged to the sub-award were incurred prior to the effective date of the sub-award agreement.

Auditors made two recommendations — for FWS to work with DMWR to resolve the questioned costs; and require DMWR to establish policies and procedures to ensure sub-recipient agreements are in place prior to the start of work and that proper regulatory requirements are followed if pre-award costs will be required.

INELIGIBLE OTHER DIRECT COSTS

DOI-OIG also reviewed a sample of other direct costs — non-payroll costs — that DMWR charged to WSFR grants and identified $7,155 in ineligible costs related to American Samoa Power Authority (ASPA) charges and $1,348 in ineligible costs related to a travel voucher charged to the wrong grant.

According to the report, the ineligible ASPA costs were the result of the DMWR incorrectly calculating allocations, and the ineligible travel voucher was an unintentional error.

According to an agreement between the DMWR and the FWS, the DMWR allocates 70% of monthly ASPA costs to its annual coordination grant. Auditors said federal regulations state that, to be allowable under Federal awards, costs must be adequately documented. Another federal regulations, cited in the report, states that costs must be consistent with policies and procedures that apply to both federally financed and other activities of the non-Federal entity.

According to the auditors, DMWR did not properly calculate the ASPA charges allocated to the grant because it was allocating the monthly amount due as listed on monthly bills instead of the amount incurred.

Because the ASG Treasury did not fully pay each monthly bill, the unpaid portion was included in the next month’s amount due. And this resulted in DMWR allocating unpaid portions of bills to multiple months.

Regarding the ineligible travel voucher, auditors say federal regulations state that a cost is allocable to a Federal award if it is incurred specifically for the award. However, the costs on the travel voucher were not incurred specifically for the grant it was charged to.

“We determined that this was an error and not the result of a systemic internal control deficiency,” the auditors said and noted that: “As a result of these issues, WSFR grants were improperly charged a total of $8,503 in ineligible costs.”

DOI-OIG made two recommendations that FWS, work with DMWR to resolve the questioned costs of $8,503; and require DMWR to implement policies and procedures that properly allocate ASPA charges.

LEAVE PAYOUT $3,167

According to the auditors, it reviewed payroll-related costs, including leave payouts charged to grants. It says that leave payouts are lump payouts paid to employees upon separation from the ASG. And DMWR can allocate a portion of the employee’s leave payout to a Federal grant, but that amount must be commensurate with the amount of leave earned from work performed related to that grant.

“We found that the Department did not have a system in place to track the amount of leave employees earned on a per-grant basis; therefore, we question the total amount of leave payouts charged to grants totaling, $3,167 within the scope of the audit,” said auditors.

To ensure leave payouts are properly allocated to grants, auditors said DMWR must determine the allocable portion of the leave payout that was earned on the related grant. Because DMWR did not track the amount of leave earned per grant, it was unable to calculate allocable portions of leave payouts. As a result, “we question the $3,167 in leave payouts as unsupported costs.”

Auditors recommend that FWS work with DMWR to resolve the unsupported leave payouts of $3,167; and require DMWR to establish policies that follow Federal regulations to ensure leave payouts are allocated based on activity charged to specific grants.

CONTROL DEFICIENCIES — IMPROPER DRAWDOWNS

The auditors also provided information on federal regulations on this issue, and provided pertinent summary of ASG’s Treasury Finance Division Standard Operating Procedure and Policy also describes reimbursements and drawdowns

The auditors said it reviewed drawdowns and determined that some reimbursement requests were initiated and received before DMWR had paid the related expenditures. They also found that DWMR did not notify the FWS that these reimbursement requests were for advance payments.

DMWR and ASG Treasury personnel told the auditors that the Treasury had directed the DMWR to request advance drawdowns to minimize the department’s accounts receivable Treasury balance.

DMWR referred to this approach as a “post-and-hold” method, according to the auditors, who explained that Treasury personnel would “post” an unpaid expenditure to its database, direct DMWR to perform a drawdown on the expenditure, and “hold” payment of the expenditure until the drawdown reimbursement funds were received.

According to the auditors, because DMWR used the “post-and-hold” method and did not make it clear to the FWS that it was requesting an advance of grant funds, DMWR “performed improper drawdowns” for the audited period.

Auditors recommended that FWS require DMWR to discontinue use of the “post-and-hold” method for grant expenditures; and require DMWR to provide sufficient support, including check details for all non-payroll, non-internal payments submitted to the FWS for reimbursement and whether the reimbursement request contains a request for advance payments.

LATE FEDERAL REPORTS

DOI-OIG explained that grantees are required to file a Federal financial report and a performance report with the FWS within 90 days from the end of the grant period. With the FWS’ approval, the reporting due date for both financial and performance reporting can be extended an additional 90 days.

However, the auditors found that DMWR submitted four financial reports past the due date. And DMWR submitted requests for extensions for three of these grants, which were approved, but still submitted the reports later than the extended reporting due date.

Auditors said failure to comply with reporting due dates in the grant terms and conditions and with Federal regulations could result in a loss of future WSFR funding. And late submission of reports limited the FWS’ ability to monitor the grants and resulted in reports that did not accurately reflect the status of the projects.

Auditors recommend that FWS work with DMWR to ensure timely submission of Federal financial and performance reports.

FWS AND DMWR

Both FWS and DMWR, were provided a draft copy of the audit report, and both concur with all recommendations. 

In Jan. 26, 2021 letter, DMWR director Taotasi Archie Soliai informed FWS that DMWR anticipates to collaborate with WSFR staff to develop an appropriate Corrective Action Plan in alignment with DOI-OIG’s recommendations.

In a follow-up Feb. 6th letter, Taotasi shared key highlights of discussions held between DMWR and ASG Treasury on Jan. 31st. And a copy of the draft DOI-OIG report was shared with the ASG Treasurer and discussion of some of the findings with conclusion as follow — cited in the letter:

•    “Post and Hold” — Treasury “will discontinue” this method on DMWR grants

•    for the travel cost, that request was keyed in error by ASG Treasury to the wrong grant account. A copy of ledger change was also submitted to FWS.

•    ASPA costs — the current ASPA billings for DMWR reflects only the current charges. Treasury currently posts the current charges based on DMWR accounts billing cost allocation.

“I will continue to ensure that the Department will pay close attention to the audit findings and recommendations,” Taotasi wrote.